A Sukuk bond is an Arabic word for financial investment certificates, or sometimes can be refer as Islamic bonds. It is the famous element in the Islamic Finance among the Muslim and non-Muslim. Other than that, sukuk also refer to trust certificates and participation securities. Moreover, it is one of the fastest growing tools in the Islamic capital market that triggered the desire of research and writings of many researchers and scholars, as a result of which is the existence of many academic writings and publications . It has become one of the most dynamic tools for capital mobilization in both the Islamic and conventional capital markets (2007, Umar).
For your information, base on their Islamic law, it is not allowed fixed income and interest bearing bond. After that, Islamic Finance comes out the sukuk bonds to fulfill its investment principles, which is charging or paying the interest. Besides that, it is similar to the financial bonds in the conventional bank, which are proof of ownership title to the investor and utilized by financial institution to raising the fund. For both conventional bonds and sukuk bonds are structured to generate revenue on the physical assets. However, the differentiation between both bonds is sukuk bonds can be consider as modern application of Islamic financial.
Malaysia’s fully experience and concrete fundamentals in Islamic finance developed over 30 years, tied with its strength in the domestic sukuk market, offers strong exciting value propositions to government agencies, multinational corporations and multilateral development banks or financial institutions across the world to originate sukuk out of Malaysia. Malaysia leads the global sukuk market, represented by 61% of total sukuk outstanding at the end 2008.2
Development of Sukuk Bonds
What is Sukuk?
Sukuk is an Islamic financial certificate bond but it refuted to conventional bonds, which is debt based instrument and Sukuk is asset based instrument. Sukuk securities adopt the Islamic laws referred to as Shari’ah and it own principles, Islamic religious law, which no all interest can make and its forbid the charging or payment of interest such as fixed income, interest bearing bonds are not permissible in Islam . Sukuk instruments are like a middleman or a bridge to issuers, primarily sovereigns and corporations in other foreign countries such as in the Middle East and Southeast Asia, with a large pool for investor to finding diversify their holdings beyond traditional asset classes. In Sukuk market, fund raised can classified in two way which is an efficient and transparent way in over 100 non-member countries in the world.
Diagram 1: Different between conventional financial and Islamic financial
Selected Historical Highlights
Key Highlights in Malaysia’s Islamic Capital Market:
1990: Issuance of first Islamic Corporate bond by Shell MDS Sdn Bhd
1993: Launch of first Islamic Equity unit trust fund by Arab-Malaysian Unit Trust Bhd
1994: First full fledged Islamic stockbroking company, BIMB Securities, was established
1999: Launch of the KLSE Syariah Index
2000: Launch of the first Islamic bond fund by RHB Unit Trust Management
2001: Issuance of the world’s first Global Sukuk by Kumpulan Guthrie
Source: Bloomberg (based on Sukuk issued out of new and existing programmes for the YTD )
Global vs Malaysia Sukuk Issuances 2005- 1H20112002: Issuance of the world’s first Global Sovereign Sukuk
Figure :Global vs Malaysia Sukuk Issuances 2005- 1H2011
In 2005 to first half of 2011, global Sukuk market and Malaysia Sukuk market was faced few economic growth and crisis, therefore it was effect issued Sukuk bond. Based on the data, Malaysia Sukuk market doesn’t showed significant growth compared with global Sukuk market between 2005 to first half of 2011. However Malaysia Sukuk market looks more stable than global market.
In 2008, global Sukuk faced financial meltdown, it is global financial crisis and the Dubai debt woes, therefore it dropped from US$31 billion to US$14.2 billion, dropped around 54%. Besides that, Malaysia Sukuk market also dropped, but the dropped amount lower than global market, around 41%.Apart from that, in 2009 Malaysia Sukuk market of the total Sukuk issuance growth around 31%, it was showed those investor have confidence to Malaysia Sukuk market.
Figure 2:Sukuk issuance by country in 2009
In 2009, Malaysia is the largest country issuer Sukuk bond compare with Indonesia, Sausi Arabia and Bahrain.Malaysia almost having around 45% of issuer Sukuk bond. The second largest is Saudi Arabia, they has around 22% for issuer Sukuk bond.
Figure 3 Malaysia: Outstanding Sukuk vs. Bonds
In this several years, Sukuk continues growth but compare with normal bond, amount of outstanding Sukuk still lower than bond. In 2011, Sukuk still not famous for the investor or issuer therefore the number was just had small amount for the outstanding Sukuk. Besides that, between 2001 and 2007 the amount of outstanding Sukuk was growth significantly. In 2007, outstanding Sukuk was catching up the normal bond and after year 2007 outstanding Sukuk still having a positive growth in the market.
This three chart showed that investor have confidence with Malaysia Sukuk market because it has its potential. In 1990s, Malaysia already had a powerful and transparent Islamic structure. Other than that, Malaysia also do more effort to promoted to foreign investor show that Malaysia is an international Islamic financial hub and had recognized by worldwide and continues lead at the front of the development of Sukuk bond.
The strength of Sukuk is lies in its own unique framework. Sukuk can carry distinct value position to issuers and investors. The Sukuk growths rapidly because had few factors.
1. Structure growth sophistication. Sukuk have a good superiority which is it had the flexibility of Sukuk structure to lead its growth continuously and it also can meet the requirement and preferences of investor and issuers by tailored suitable Sukuk to them. Now a day, Malaysia have more than a types of Sukuk in the market such as profit and loss sharing (Musyarakah), cost plus financing (Murabahah), deferred payment (Al-Bai’ Bithaman Ajil), leasing (Al-Ijarah), agent(Al-Wakalah) and so on to wider range of investors.
Figure 4: Type of Sukuk apporeved in Malaysia
In 2011, Malaysia has few types of Sukuk approved in Malaysia Sukuk market and types of Sukuk in Malaysia market can classified to Contracts of participation and exchange. Contracts of participation are such as Mudharabah Sukuk and Musyarakah Sukuk. Contracts of exchanges are such as Murabahah and Ijarah. The largest number of investor invest is Musyarakah, the number is around 63% in Sukuk market. The second largest is Ijarah, it’s around 15% in Sukuk market.
2. Clarity on the regulatory treatment. Excellent regulatory treatment in Sukuk structure has provided regulatory certainty to Islamic financial institutions with regard to their investments.The adherence of the Capital Adequacy Standard was accomplish and issued by the Islamic Financial Services Board (IFSB)
3. Strategic centralize to develop overall Islamic financial system. Every investor or issuers have it own demand or requirement therefore Sukuk can base on each investor or issuers to choice suitable own Sukuk to themselves. For example, in takaful operators the investors can choice medium or long-term liabilities of takaful funds.
2.1 Introduction to Mechanism of Sukuk Bond
Sukuk bond is one of the Islamic financial products which grow rapidly nowadays. It is generally known as Shariah compliant  bond as it is structured according to the Islamic principles. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has defined sukuk as the certificates of equal value that represent an undivided share in the ownership of the underlying asset, usufruct, services or investments in particular projects or special investment activities. (Institutions, 2008) Besides, sukuk bond also can be described as an asset-based investment because the investor which is the sukuk holder owns the undivided interest in the underlying asset even if bad situation occurs.
Sukuk bond is not a debt certificate, hence, the claim of sukuk bond is not just a claim to cash flow but it also represents the ownership claim on a pool of underlying assets. However, under the various types of sukuk which structured based on different Islamic principles, the investor has different rights and obligations. When the sukuk is represent the ownership of the underlying asset such as Ijarah sukuk, the investor can claims not only on the underlying asset. But, at the same time, it can be claimed against the cash flow and revenues generated from the sale of the asset.
Besides, for the sukuk which issued as the sale of asset-based through the contract of exchange such as the Murabahah and Istina sukuk, the investor has the rights to claim against the cash flow from the contract of exchange but not on the physical asset. This is due to the transfer of ownership which is now to the obligator. On the other hand, for the type of sukuk which provide funds for projects such as Musyarakah sukuk and Mudharabah sukuk, the investor has the rights on the undivided interest in the specific investments. The difference in both of this sukuk is just that the musyarakah sukuk holder shares both the profit and loss however the mudharabah sukuk holder share only the profit while loss will not be sharing. (Bank Negara Malaysia and Securities Commission Malaysia, 2009)
There’re many types of sukuk bond which is structured based on various approved Islamic concepts and principles. Among the 14 types of sukuk which are identified by AAOIFI, the most common sukuk included Ijarah sukuk (leasing of specific assets) and the Musyarakah sukuk (profit & loss-sharing scheme). There’re also other types of sukuk which included Murabahah sukuk (cost-plus sale), Istina sukuk (project finance), Mudharabah sukuk (profit-sharing), Salam sukuk, Hybrid sukuk and so forth. In the end of October 2011, Musyarakah sukuk leads the biggest proportion among the various types of sukuk bond which is 59%. It then was following by Ijarah sukuk (13%), Murabahah sukuk (10%), Mudharabah sukuk (9%) and Wakalah sukuk (9%). (Team, 2012)
2.2 Similarities and Differences between Sukuk Bond and Conventional Bond
Sukuk bond shared some similar characteristics with the conventional bond. For instances, both of these bonds have a fixed term maturity, can bear a coupon and are tradable on the normal yield price. Besides, both of the sukuk bond and conventional bond have similarities in the following features: marketability, rate ability, enhance ability and also the versatility. (What is Sukuk?) Both of them are liquid instruments, therefore can be easily transferred and tradable in the financial markets. Furthermore, both of these bonds are structured based on the assets that generate revenues. The revenue generated from the underlying asset is the source of income to pay for the profit on the sukuk bond. (Bank Negara Malaysia and Securities Commission Malaysia, 2009)
However, there still have differences among the sukuk bond and the conventional bond. First of all, conventional bond is structured in such a way that the “interest” is the main point of all those transactions. The issuance of conventional bond is based on the exchange of paper and it doesn’t represent the ownership of conventional bondholders in the enterprises that issue the bond. Rather, it represents the interest-bearing debt owed to the conventional bondholders. Consequently, the issuer of conventional bond has the contractually obligation in paying the interest and also the principal to the bondholders on a specific date. On the other hand, sukuk bond is structured in a way that the issuance is based on the exchange of an approved asset. Because of the prohibition of interest charging by Islamic law, sukuk bond allows the sukuk bondholders to claim an undivided ownership in the underlying asset and share the revenues generated from the underlying asset.
Furthermore, sukuk bond is different with conventional bond due to its asset-based features. When the situation occurs where the issuer of conventional bond is unable to pay for the debt they owed to the bondholders, the bondholders which is the investors will face a great loss on their investments. This is because the contract usually doesn’t guarantee that the asset can be secured and be used to recover at least partial of the investments. However, for sukuk bond, because it is asset-based and the sukuk bondholders have undivided ownership on the underlying asset, even how bad the situation, the investors can claim against major part of their investment. Hence, the sukuk bondholders are more protected from this kind of risk compared to the conventional bondholders.
Besides, the issuance of sukuk bond must compliant with the Islamic law in its nature and use. However for the conventional bond, it can be issue for almost any purposes as long as it is legal under jurisdiction. Next, for the sukuk bondholders, the expenses that related to the underlying asset may be attached to them while the conventional bondholders are not responsible in these asset-related expenses.
2.3 Benefits of Sukuk Bond
Sukuk bond which structured compliant with the Islamic law have the following benefits. First of all, it acts as a tool for banks and Islamic financial institutions in liquidity management. (Benefits of Sukuk) When the bank and financial institutions have excess amount of liquidity, they can use these excess money to purchase and invest in sukuk bond.
Meanwhile, when they’re in the need of liquidity, they can choose to sell their sukuk bond through the secondary market. This clearly shows the features of sukuk bond which is liquid and hence can be easily traded in the financial market.
Besides, sukuk bond provides a way in raising funds. It allows the corporate to raise funds through the issuance of sukuk bond. However, the sukuk bond can only be issue for any purpose that complaint with Islamic law. Furthermore, due to the asset-based feature of sukuk bond, it offers a lower risk and hence reduces the cost of financing. This is because even when bad situation happen to the issuer of sukuk bond, the investors can claim against the ownership on the underlying asset and get recover from major partial of their investment.
2.4 Sukuk Guidelines
Starts from 1 July 2000, any issuance, offer or invitation of sukuk has to get approval from the Securities Commission Malaysia (SC) under section 212 of the Capital Markets and Services Act 2007 (CMSA)  (Malaysia S. C., Introduction, 2011)
The following information are the guidelines which stated by Securities Commission Malaysia (SC) and effective from 12 August 2011 (Malaysia S. C., 2011). Any corporation that wishes to issue, offer or make an invitation of sukuk has to first appoint a principal adviser who specified by the SC in the Principal Adviser Guidelines. The purpose of appointing a principal adviser is to help the corporation to seek approval from SC for the proposed issue, offer or invitation of sukuk. (Malaysia S. C., Issuers & Submission of Proposals, 2011)
There’re a set of documents and a declaration letter that SC requires the issuer to submit through the principal adviser. These documents and the declaration letter are needed to obtain the approval from SC. (Malaysia S. C., Appendix, 2011) Two hard copies and one electronic copy of these documents should be submitted. Within 14 working days after SC receives the required documents and declaration letter, SC will either grant its approval or reject the proposal which doesn’t fully follow the guideline. Once the issuer obtains the approval from SC, they should submit another set of documents (Malaysia S. C., Appendix, 2011) to SC through their principal adviser. (Malaysia S. C., Documents and Information Required, 2011)
Besides, the issuer is required to conjunct with the principal adviser in appointing a Shariah adviser to make sure that the documentation, structure and the mechanism of sukuk are following the Islamic law. There’re plenty of Shariah rulings that have to follow for all types of sukuk as well as some specific type of sukuk in the requirement of underlying asset, asset pricing, compensation and so forth. (Malaysia S. C., Appointment of Shariah Adviser & Shariah Rulings Applicable, 2011)
Meanwhile, the underwriting of any issue, offer or invitation of sukuk will depends on the decision of the issuer. (Malaysia S. C., Underwriting, 2011) The implementation time frame for sukuk issuance is within one year from the date of the approval of SC except for the case of shelf registration scheme which must be implemented within two years. (Malaysia S. C., Implementation Time Frame for Sukuk Programme or Sukuk Issuance, 2011)
2.5 Sukuk Market in Malaysia
From the journal, we know that the sukuk market has been developed rapidly in this decade with the evidence that more than 50% of Malaysia’s bond market belong to the sukuk market. Sukuk market in Malaysia successfully attract the attention of international corporations and multilateral agencies and drawn a lots of participation of these parties in raising funds and as well as investing in the sukuk market. Moreover, sukuk market of Malaysia is now having continuous innovation such as it offers the chance for international corporations to participate
and plays a role in our Islamic financial system.
As mentioned before, there have a greater development compared to the beginning of Malaysia’s sukuk market which our country started with a RM125 million of issue size by Shell MDS Sdn. Bhd.. The improving development once again can be clearly proven by the shoot up of the value of sukuk issue which is at RM15.4 billion by the Binariang GSM Sdn. Bhd. Besides, Malaysia is the fastest growing country in the global for the area of sukuk market with 22% of
average annual growth within the period of 2001 until 2007.
There’re a lots of efforts that has been put in the sukuk market to enhance its stability. First of all, to ensure the financial stability, Malaysia had cooperated with several regulatory authorities and participates in Islamic Financial Services Board (IFSB), Islamic Financial Stability Forum (IFSF), Islamic Development Bank (IDB) and also involve itself in the International Islamic Liquidity Management Corporation (IILM). Besides, the introduction of new type of financial instruments which has the extended maturity profiles has brought the Malaysia’s sukuk market to become more innovative. This is because it increases the diversity of both local and foreign participants and also meets the requirements of both issuers and investors so that there will be a win-win situation. Meanwhile, the increasing number of issuance in foreign currency had successfully extended the international gateway and attracts the participations from foreign countries in Malaysia’s sukuk market. This in turns speed up the development of our sukuk market and also facilitate a good relationship with the international financial markets.
The development of Malaysia’s sukuk market brings the economy to become more diversified and more driven by the private sector than the government. This is shown by the increasing demand for the financing requirements from private sector compared to the market which is previously mainly control by the Government debt securities.
In a nut shell, Malaysia leads the development of sukuk market not only in terms of total sukuk issuance which accounted 68.9% of total global outstanding at the end of 2007, but at the same time showed excellent performance in the innovative sukuk structure and is more competitive in attracting the investors. In the future, Malaysia will continue its efforts to enhance the relationship with others international financial markets through ways such as partnership or maybe cooperation. (Technology, Sukuk Market in Malaysia, 2011)
2.6 Challenges of Sukuk Market
According to the journal, we understand about few challenges that occur in sukuk market. First of all, the sukuk market faced the problem when there is lack of uniformity in the procedures that applied Shariah’s principles. The lack of professional in Shariah standards and also the lack of awareness of the employers and manager of sukuk even make the things worse.
Besides, when it comes to the collaborations among the countries, things become challenges because each country has their own laws and some of their laws will conflict with Islamic financial system and has to be amending in order to operate the system. Furthermore, there’re still occur the gap of knowledge even though AAOIFI, Central Bank of Malaysia and also other organizations have put efforts in distributing the information to the public. Therefore, more focus have to put at the information dissemination through ways such as forums, training as well as set up more education center.
Last but not least, it is difficult to maintain the unique features of sukuk. This is because those who already get used with the characteristics of conventional products will tend to request for the products which has the same characteristics with conventional products. This in turns will neglect the identity of the unique sukuk bond. (Technology, Challenges in Sukuk Market, 2011)
Trading of Sukuk Market in Malaysia
Between these ten years, the institutional arrangements particular gave a greater focus to develop the sukuk market. The sukuk market now accounts for more than fifty percent of Malaysia’s bond market. The market has drawn the participation from a wide range of international corporations and multilateral agencies in raising funds and investing in the sukuk issuances out of Malaysia. More lately, there has also been continuous innovation and an increasing number of issuances in foreign currency. As Malaysia offers international participation in the Islamic financial system, also offer to be an international gateway, particularly in strengthening the link between the two important dynamic growth regions of Asia and the Middle East. (Zeti Akhtar Aziz, 2010)
Shell MDS Sdn. Bhd. started Malaysia’s sukuk market with a simple issue size of RM125 million in 1990 and is growing in size and increasingly sophisticated now. This development is evident in the largest sukuk issue recently valued at RM15.4 billion which is USD4.7 billion by Binariang GSM Sdn. Bhd. Now, the sukuk market in Malaysia with an average annual growth of 22% issued for the period 2001-2007 is among the fastest growing in the world. Malaysia has continued it success by introducing innovative sukuk structures such as convertible sukuk musyarakah by Khazanah Nasional Berhad, the Malaysian government investment holding company after introducing the first sovereign global sukuk in the world in 2002. This combines the features of the first full convertibility is usually only used for conventional equity-linked transactions is a historic issue of the first of its kind in the world. (Central Bank of Malaysia, 2007)
Malaysia also continues to collaborate with other regulatory authorities to ensure financial stability in the Islamic financial system. This will be through Malaysia’s active involvement in the Islamic Financial Services Board (IFSB), the Islamic Financial Stability Forum (IFSF), the initiatives by the Islamic Development Bank (IDB), and finally in the newly formed International Islamic Liquidity Management Corporation (IILM). Depth and liquidity of the market has increased by secondary trading in the Malaysian sukuk market with the participation of more companies, including foreign-owned companies continued use of this market for funding purposes. Long-term funding needs are financed by a large number of corporate issuance. The diversity and size of the sukuk transaction was the increasing value proposition is very attractive to investors who want to diversify their asset portfolios, therefrom creating a vibrant secondary market.
The Malaysian sukuk market has also grown to become more sophisticated and innovative to meet the multiplex risk-return requirements and profiles of both investors and issuers. Diversified range of players have been generated by the proliferation of new types of instruments with extended maturity profiles , both local and foreign to participate in the market. This was facilitated by the liberalization of the market in 2005 to allow for issuance of debt securities by foreign corporations and multilateral agencies in ringgit denominated papers. This was extended to foreign currency denominated issuances in year 2007. Actually, this has attracted many multilateral agencies, multinational corporations and foreign corporations to raise funds and invest in origination and issuances out of Malaysia, therefore enhancing the Malaysian market, and strengthening Malaysia’s inter-linkages with other international financial markets.
The transformation of the Malaysian economy has been accompanied by the development of the sukuk market in Malaysia that has now become more private and diversified sector driven. The Government debt securities initially dominated the market, now reflects the growing demand for the long term financing requirements of the private sector. Now, the corporate sector raises 58% of their financing requirements through the sukuk market and debt securities compared to ten years ago is about 33%. The presence of a liquid and deep debt securities and sukuk market thus contributes towards the stability of the financial system.
Now, with a number of Malaysia’s sukuk issues by 68.9%, or USD62 billion (or RM213 billion) of total global outstanding at the end of year 2007, Malaysia is the world’s largest sukuk market. Amount of corporate sukuk in Malaysia more than RM30 billion in year 2007. Malaysia not only lead the development of the sukuk market in terms of total sukuk issuance, even in terms of the introduction of innovative sukuk structures and competitive to attract more individual or corporation investors. Moving forward, Malaysia will continue its efforts in strengthening our international linkages in the global Islamic financial system through cooperation and collaborative partnerships with the objective of contributing towards greater economic integration and international financial. Certainly, sukuk ( Islamic bond ) proved that it is among the most successful Islamic financial product in the industry and be one of the fastest-growing sectors in the global financial landscape.
Type of Sukuk Bonds
Ijarah sukuk is an Islamic alternate of conventional leasing. Ijarah is a contract the distribution of funds to use right transfer (benefit) of an item within a certain time to the lease payments (ujrah), between the finance company as the lessor (mu’ajjir) with tenants (musta’jir) not followed by transfer of ownership of the goods themselves . These are sukuk that represent ownership of equal shares in a rented real estate or the usufruct of the real estate. In other words, issuing certificates of ownership of assets, leased to a particular consumer is known as Sukuk Al Ijarah or simply Ijarah Sukuk.
Other than that, Ijarah sukuk also is a bond between a bank with consumer to take on an item or even object leases and bank-owned banks have a service fee for items which is rent, and at the end with the purchase of leasing object by the consumer. (In Shaukat’s (2010) article, Common Structures of Sukuk, Ijarah sukuk were described as “Ijarah sukuk are the securities representing ownership of well defined existing and known assets tied up to a lease contract, rental of which is the return payable to sukuk holders. ” (p. 10).) Ijarah sukuk have a main concept which means selling the benefit of apply or service for a fixed price or salary. Base on this concept, the Islamic bank make it available to the consumer applies of service of assets or equipments for a fixed period of time and also the price.
1Source: Sharia Economy Journal, Ijarah Definition (2011)
Figure 5: The process of Ijarah SukukSukuk al-Ijarah.png
The chart above shows few stages of the transaction process. First stage is Contract of Cash Sale. SPV purchases property from obligator as the step 1 above, such as SPV purchases hospital from government. After that, the assets purchased by the SPV are funded by the issuance of sukuk which is trust certificates which represents beneficial ownership in the assets and the lease as the step 3 shown above. Besides that, government received cash proceeds as step 7 while Stage 2 is Contract of Leasing (Ijarah).
At first, SPV rents property to the government for specified period which is step 2 shown above. After that, step 6 shows that SPV collects rentals. During the tenure, SPV passed the rentals to investors as the step 9. For your information, example is periodic distribution or coupon. Continually, at the maturity, SPV sells the property to the government at an agreed price. Government pays cash to SPV. Lastly, SPV simultaneously pay investors cash for sukuk redemption.
Musharakah sukuk is a structure of partnership which is used in Islamic finance instead of interest-bearing loans. It is also a mode of financing against which Sukuks can be issued for. It does not differ from the Mudaraba sukuk except in the organization of the relationship between the party issuing such sukuk and holders of these sukuk, whereby the party issuing sukuk forms a committee from the holders of the sukuk who can be referred to in investment decisions . Musharaka Sukuk are used for mobilizing the funds for establishing a new project or developing an existing one or financing a business activity on the basis of partnership contracts (Shaukat, 2010). Moreover, Musharakah Sukuk have a specified maturity date, and are negotiable in the secondary market.
In the assets of the Musharakah sukuk, for every sukuk would have a representative holder’s proportionate ownership. These Musharaka certificates can be treated as negotiable instruments and can be bought and sold in the secondary market . Musharakah sukuk allows each party involved in a business to share in the profits and risks. Other than that, profit earned by the Musharakah sukuk is shared according to an agreed ratio between the Issuer and Investors at an agreement. Although the profit and loss is sharing, while it shared between the investors as per investment ratio only. Besides that, to ensure the tradability of Musharakah sukuks, all the assets should not be in liquid form.
1Source: Accounting and Auditing Organization for Islamic Financial Institution, AAOIFI 2Source:Common Structure of Sukuks, Mughees Shaukat
Figure 6: The process of Musharakah SukukSukuk al-Musharaka.png
From the above shown that, at the beginning, Corporate and the Special Purpose Vehicle (SPV) enter into a Musharakah Arrangement for a fixed period and an agreed profit-sharing ratio. Thus, the corporate undertakes to buy Musharakah shares of the SPV on a periodic basis. First, Corporate (as Musharik) contributes land or other physical assets to the Musharakah. After that, in 2 a & b shown that SPV (as Musharik)
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